The Singapore-based director ended a six-year stint on the board, offering his impressions on how the dairy co-operative’s future stacks up.
Fonterra chairman John Monaghan came in for some stern criticism at the meeting, given his tenure through the now-dumped drive to collect 30 billion litres of milk in five or six different pools worldwide by 2025.
However, Israel, a veteran director who chairs Singtel and Singapore Post, said Fonterra’s governance frameworks and processes are comparable to any world-class listed company.
“Where I see the challenge, in terms of understanding the role of boards, is that too often governance is confused with judgement,” he said.
Because management will always know a business more intimately than directors, the executive team’s judgement is the first port of call, whereas the board’s role is secondary in testing management and deciding to either accept their recommendations or say no, he said.
That sounds basic but experience across a variety of companies is mixed, he said.
For Fonterra independent directors such as himself bring skills and experiences to complement those of the farmer directors.
“Perhaps a point of reflection for the future is whether Fonterra would benefit by having a greater number of independent directors around the table,” he said.
However, the most important decision a board ever makes is appointing the chief executive and Israel is a strong advocate for Miles Hurrell, who he said moved quickly and directly to make significant progress in a very short time.
“I’m not going to comment on the past but do want to strongly endorse Miles’ importance and the pivotal role he plays,” he said.
Israel also backs the strategy to ditch a grandiose plan of building global milk pools in pursuit of volume and instead focus on extracting value from the domestic collection.
That is because it is grounded in reality and not overly aspirational, plays to Fonterra’s strengths in creating value from its shareholders’ milk and doesn’t need as much capital.
“The strategy has significantly lower risks and will suggest lower volatility,” he said.
“Importantly, I have confidence in management’s ability to execute on it.”
Fellow independent director Scott St John, whose reappointment was ratified with almost 90% support, said he is enormously energised by what the co-operative is doing and has enormous conviction it is on the right path.
“I would not be here if I did not.”- BusinessDesk
